top of page

Pros & Cons of a Bi-Weekly Mortgage Program


When borrowers enter into a contract to make bi-weekly payments on their mortgage, the amortization schedule is accelerated. For example, with a 30-year amortization schedule, the borrower makes 12 payments per year. In a bi-weekly arrangement, the borrower makes 26 ‘half’ payments, which allows the loan to be paid off in 22.8 years instead of 30 years. It’s the same as making 13 monthly payments.

This ultimately saves the borrower thousands of dollars in interest rate fees. However, bear in mind that bi-weekly programs usually have some type of setup, transaction, and maintenance fees associated with them. A custodian manages the bi-weekly payments in a trust account (and also makes a profit on the interest accrued there). Because the lender really doesn’t accept partial payments, this middle man is still making monthly payments to the lender on some type of pre-payment schedule.

It is important for the consumer to know that the same results can be achieved without hiring an outside company to do this. As long as your loan program carries no pre-payment penalty, pre-payments can be made on a monthly or annual basis to shorten the loan term to save money on interest or remove PMI charges on loans that have less than a 20% down payment. The borrower simply needs to indicate the extra payment is being made toward the principal balance, and have the discipline to make these extra payments as scheduled.

Travis Newton, Sr. Mortgage BankerOregon FHA & USDA Financing ExpertPreferred Mortgage503.931.4490Click Here for Pre-Approval!NMLS 15261/NMLS-269195

Recent Posts

See All

7 Smart Strategies for Kitchen Remodeling

By: John Riha Published: May 30, 2013 on houselogic.com Follow these seven strategies to get the most financial gain on your kitchen remodel. A significant portion of kitchen remodeling costs may be

We Bought a Foreclosure

A year ago now my husband and I bought a foreclosed home. It was our dream property, we had fixed up a few homes before so we were ready to dig into this project. While I would never wish we had don

Comentarios


bottom of page